Ten Years after the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?
Journal of Economic Perspectives
vol. 33,
no. 2, Spring 2019
(pp. 89-114)
(Complimentary)
Abstract
This paper takes stock of what we have learned from the "Renaissance" in fiscal research in the ten years since the financial crisis. I first discuss the new innovations in methodology and various strengths and weaknesses of the main approaches to estimating fiscal multipliers. Reviewing the estimates, I come to the surprising conclusion that the bulk of the estimates for average spending and tax change multipliers lie in a fairly narrow range, 0.6 to 1 for spending multipliers and -2 to -3 for tax change multipliers. However, I identify economic circumstances in which multipliers lie outside those ranges. Finally, I review the debate on whether multipliers were higher for the 2009 Obama stimulus spending in the United States or for fiscal consolidations in Europe.Citation
Ramey, Valerie A. 2019. "Ten Years after the Financial Crisis: What Have We Learned from the Renaissance in Fiscal Research?" Journal of Economic Perspectives, 33 (2): 89-114. DOI: 10.1257/jep.33.2.89Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E43 Interest Rates: Determination, Term Structure, and Effects
- E44 Financial Markets and the Macroeconomy
- E62 Fiscal Policy
- G01 Financial Crises
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